annual report 2o18 - warba insurance company · annual report 2o18 commercial registration no....

2O18ANNUAL REPORT

Commercial Registration No. (24982)Insurance Registration No. (4)Company established October 24th, 1976KSE Code (WINS)

Based on The 2018 Performance

Y E A R S O F R A D I A N C E

H.H. Sheikh Sabah Al-Ahmad Al-Jaber Al Sabah

The Amir of the State of Kuwait

H.H. Sheikh Nawaf Al-Ahmad Al-Jaber Al Sabah

The Crown Prince of the State of Kuwait

Contents

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07OUR VISION, MISSION AND VALUES

2018 AGM AGENDA

BOARD OF DIRECTORS

CHAIRMAN’S LETTER

CEO’S LETTER

COMPANY OVERVIEW

OUR STRENGTH, OUR DIVISIONS

CORPORATE GOVERNANCE

CONSOLIDATED FINANCIAL STATEMENT

OUR VISION AND MISSIONEMANATE FROMOUR CORE VALUES

Our Vision To confirm our position as the most preferable partner.

Our Mission To redefine the principle of successas the art of working together.

Our Values• Credibility • Integrity • Transparency

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Agenda of the Annual Ordinary General Meeting of Shareholders (AGM)

For the Financial Year Ended December 31, 2018

1- Hear the report of the Board of Directors about the Company's activities and financial position for the financial year ended 31 December 2018.

2- Hear and approve the Corporate Governance Report for the fiscal year ended 31 December 2018.

3- Hear and approve the report of the Audit Committee for the financial year ended 31 December 2018.

4- Hear and approve the auditors' report for the financial year ended 31 December 2018.

5- Hear the report of any violations monitored by the regulatory bodies for the financial year ended 31 December 2018. (If any).

6- Approving and ratifying the final financial statements and the balance sheet for the year ended 31 December 2018.

7- Hear the Internal Control Report for the financial year ended 31 December 2018.

8- Approving the recommendation of the Board of Directors not to distribute dividends for the financial year ended 31 December 2018.

9- Approving the recommendation of the Board of Directors to not distribute remunerations to the members of the Board of Directors for the financial year ended 31 December 2018.

10- Discharge of the members of the Board of Directors for all related to their legal, financial and administrative actions for the financial year ended 31 December 2018.

11- Authorizing the Board of Directors to buy or sell the Company's shares not exceeding 10% of the number of its shares, in accordance with the provisions of Law No. (7/2010) and its Executive bylaw and their amendments.

12- Approving transactions with related parties for the financial year ended December 31, 2018, and authorize the Board of Directors to deal with related parties that will take place during the financial year ended 31 December 2019.

13- Election of the members of the Board of Directors for the next three years (2019-2021), in accordance with Articles (16), (17) of the Memorandum of Association and the Articles of Association.

14- Appointment or reappointment of auditors from the approved list of auditors with the Capital Market Authority, taking into account the period of mandatory change of auditors for the financial year ending 31 December 2019, and appointing the Board of Directors to determine their fees.

Anwar Jawad BukhamseenChairman

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Warba InsuranceBoard of Directors

As of 31 December 2018

Mrs. Najat Hamad Al-SuweidiBoard Member

Mr. Hazim Ali Al-MutairiBoard Member

Mr. Raed Jawad BukhamseenBoard Member

Mr.Rafid Abdulla Sayid Rajab Al-RifaiBoard Member

Mr. Saleh Naser Al-SalehBoard Member

Mr. Anwar Jawad BukhamseenChairman

Sheikh/ Mohammad Al-Jarrah Al-SabahVice Chairman

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Report of the Board of Directors for 2018

Chairman's Letter

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Dear Shareholders,

On behalf of the Board of Directors and everyone working at Warba Insurance, I am pleased to welcome you to the Company’s Annual General Meeting of Shareholders. I start this meeting by praising God Almighty, and thank you for your continued support and trust as we continue to endeavor to achieve our Company’s objectives and raise its position to new levels worthy of its history.

As we enter our 43rd year, Warba Insurance has become an example of continued success and strong standing as one of the oldest and most recognized insurance companies in Kuwait. The Company has proved for more than four decades to be a cornerstone of the Kuwaiti insurance industry and a solid institution against economic and market volatility thanks to its modern strategies developed that preserve its principles and values and respond to changes in the local, regional and global economy.

Today, we present to you the fortieth annual report of Warba Insurance, in which you will find the Company’s 2018 earnings and performance, as well as the consolidated financial statements, auditors’ report and the corporate governance report for the financial year ended December 31, 2018.

In the beginning, I would like to start by presenting the achievements of the Company over the year, a clear proof of the soundness of the policies to which we commit. These policies have enabled the Company to achieve new milestones year after year and ensured Warba Insurance’s growth is in constant uphill. And as we make new achievements, we are more than ever focused on maintaining and growing our level of performance in line with present dynamics and weathering obstacles presented by economic challenges and other factors.

Under the “Warba Vision 2021", the Company invests all of its resources and capabilities to fulfill the objectives developed in partnership with one of the most experienced US-based business development companies, the Boston Consulting Group (BCG), an indispensable step that is enabling the Company to maintain the growth pace of its current business line while it implements the new vision which aims to bring a qualitative change into the company, achieve the objectives and regain its leading role in the insurance market in Kuwait.

Warba Insurance focused on its restructuring in general, and in particular the restructuring of its operations in the framework of enhancing and improving its insurance portfolio, adopting selective business policies based on scientific principles and controls, and in accordance with international best practices, in an aim to maximize returns and solidify the business. These steps required an auditing and reclassification of all operations and investments performed by the Company, which increase the net written premiums by 8.7%, in addition to expanded and targeted new segments in the Kuwaiti market through enhanced services and new products that cater to the needs of each segment.

In its commitment to the economic policies and reforms adopted in Kuwait which focus on reducing public expenditure, Warba Insurance closed the year with a reduction in general and administrative expenses by 31.6%, all while maintaining outstanding levels of service and quality of business.

In global reinsurance, Warba Insurance ensured that its agreements are supported by reputable companies that have a high solvency and hold a track record of strong technical capabilities. The Company has therefore renewed all its reinsurance agreements with better terms than in previous years.

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Leading Indicators

2018 witnessed significant and promising results that are reflected in these earnings:

- Net profit to the shareholders of the parent company increased by 213%, or KD 781,524 in 2018, from a loss of KD 690,405 in 2017.

- Shareholders' equity increased by 8.5% to reach KD 35,901,863 in 2018,in comparison to KD 33,090,517 in 2017.

- Net written premiums increased by 8.7% to KD 14,270,288 in 2017, in comparison to KD 13,133,671 in 2017.

- Net investment income increased by 608% from a loss of KD 240,414 in 2017 to a profit of KD 1,227,404 in 2018.

- General and administrative expenses decreased by 31.6% from KD 7,208,065 in 2017 to KD 4,933,851 in 2018.

- Total technical reserves increased by 57.4% to KD 52,202,771 in 2018 in comparison to KD 33,159,431 in 2017.

It is clear from these indicators that the Company’s comprehensive reform plan which began in 2017 has brought its results in 2018. The Company is recovering and returning to its leading position in the local, regional and global insurance markets.

Investments

Warba Insurance has restructured the components of its investment portfolio by exiting investments with weak returns or ranked high-risk, while holding on investments in moderate risk sectors that generate high and stable returns. The Company’s conservative approach has generated significant returns and increased the return on investment by 608%.

One of the Company's most significant achievements in 2018 was maintaining its credit rating at Baa1 with a stable outlook by one of the leading rating agency, Moody’s. The rating reflects the Company's long-term financial solvency and viability, and is proof to the efforts made to maintain and enhance the Company's performance.

Warba Insurance was successful at renewing its ISO 9001:2015 Quality Management certification for eleventh consecutive year, which it first obtained on the basis of the 2008 standards and earned it year after year until the latest standards issued in 2015. The renewed certification reflects the Company's commitment to the highest quality in management and business operations, as well as in the implementation of new programs to improve operational processes, insurance services, as part of its ongoing endeavors to excellence, progress and best practices in management following the latest international standards and regulations.

Supporting its business and quality improvements, the Company continued to work with an effective tool for the protection of information technology (IT) in an aim to increase the Company’s capabilities to protect data and information and strengthen its information security unit from electronic attacks.

Accordingly, the Company obtained the ISO 27001:2013 Quality in Information Technology Certification in recognition to the efforts invested in the field.

Warba Insurance also continued to advance in its strategic direction towards the development and modernization of the IT unit in various sectors in order to enhance the quality of customer service and raise the efficiency in completed business.

In addition to these advancements, one of the most important achievements in 2018 was our investment in human capital and the development of skills. The Company adopted a new organizational structure which

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employs high qualified professionals whom positively contribute to the Company's growth and prosperity. The Company also focused on the continued development of its human resources by partnering with leading companies and institutes in the field to develop training programs aimed at enhancing their skills and as part of its strong belief in the true wealth of the human capital in the growth of any economic entity

In 2018, Warba Insurance increased its support to activities that served communities, contributing to social and charitable initiatives such as:

- Sponsored the 2018 World Cup magazine,

- Provided a golden sponsorship to the Kuwait Industries Union,

- Participated in Annahar newspaper Ramadan Cup,

- Sponsored the Kuwait Fire Protection Association,

- Maintained our facility at Kidzania, the kid-sized metropolis, which continued to operate in an aim to contribute in building children’s work skills as well as to educate them about the importance of insurance in their day-to-day dealings. Our goal is to help build a generation that is more aware of the needs of tomorrow.

Future Outlook

The Board of Directors continues to implement the “Warba Vision 2021” which fully restructures the Company in a clear aim to reacquire its leading position in the insurance sector. The Vision also aims for future expansions, regionally and globally, to grow the Company and achieve its objectives of adding value to shareholders, increasing profitability and growing market share.

Board Recommendation

The Board of Directors has recommended to not distribute dividends for the fiscal year ended December 31, 2018. Funds will be invested to further strengthen the Company's position in the coming period and support its vision and future outlook.

Dear Shareholders,

Concluding my report to you, I extend our sincere gratitude to His Highness the Emir, Sheikh Sabah Al Ahmad Al Jaber Al Sabah, and His Highness the Crown Prince Sheikh Nawaf Al Ahmad Al Jaber Al Sabah, may God protect them to lead our country.

We also extend our gratitude to the Ministry of Commerce and Industry for its continued support to the specific needs of the insurance sector. We thank the Insurance Department, Ministry of Finance and regulatory authorities including the Capital Market Authority and Boursa Kuwait, on their efforts to improve the local economy and raise it its level to international standards.

I present my gratitude as well to reinsurance companies, and praise the continued cooperation between local insurance companies in serving the local market at our best. We thank your customers for their valuable trust and affirm that we will continue presenting them with a high level of services and remain always at their best interest.

Last but not least, I extend my gratitude to the management and employees of Warba Insurance whose efforts and professionalism have driven the success and advancement of our Company.

May God bless our efforts and work that aim for the best interest of our country.

Sincerely,

The Board of Directors

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Report of the Board of Directors for 2018

CEO Letter - 2018

Dear Sirs,

It gives me pleasure to present to you the performance and results of Warba Insurance Company during the year 2018. I would describe 2018 as an excellent year for Warba, during which we made great progress despite continued challenging market conditions. I am pleased to report that we improved our financial performance, enhanced our technical reserves and strengthened our governance.

Warba has been going through a transformational phase of its existence as part of the Company’s “Warba Vision 2021” that was established and activated back in 2016. The vision mainly aimed to transform the organization into a more dynamic national insurer striving for providing innovative insurance products with sustainable profitability.

By all measures, the year ended 31st December 2018 was an eventful year for Warba. We have invested significantly in our human and technological capital as part of our commitment to operate within the highest and most-advanced standards. Also, the Company improved internal processes and systems so as to enhance corporate governance, risk management and cost efficiency.

The growth in Warba’s profits compared to the previous year’s loss resulted not only from prudent underwriting and claims management but also from the company’s ability to meet its planned increase in retentions which has increased year-on-year and remain a cornerstone of our insurance risk management policy.

I’m extremely proud of what all the teams here in Warba have accomplished this past year. We strongly believe that our employees are our most valuable asset and they have invested their unmatched knowledge in providing quality insurance products and services to the Company’s customers.

The development of the human resources was a top priority for the management throughout the year. This included preparing an appropriate training program and recruitment of qualified personnel to implement the company’s long-term vision. Management strongly believes in the importance of training and customer service as a key competitive differentiator. In this context, the development of a cadre of skilled executives is critical to lay the foundation for future succession.

Warba has also reviewed and updated its underwriting policies and procedures in order to reflect changes in the operations, improve controls and streamline processes. The financial policies and procedures for the Company was revamped and this should improve the operational efficiency.

In conclusion, I would like to express my thanks to the Board of Directors for their steadfast support and guidance, and to our customers for their continued loyalty and trust. In particular, I would also like to pay tribute to the continued dedication and hard work of the Company’s management and staff. Their individual and collective contributions during the year were undoubtedly a major factor to the Company’s impressive achievements during 2018.

We promise you to continue on our chosen path of prudent expansion and exemplary growth in tandem with astute investment strategies to continue our success story.

Anwar Fozan Al-SabejChief Executive Officer

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Company Overview

Warba Insurance Overview

Warba Insurance was established in 1976, with Kuwait’s heritage and values at heart. The company has since provided insurance services to individuals and companies in utmost integrity and security. With 42 years of experience, Warba Insurance continues to provide the highest standards and service quality in insurance policies that meet the needs of the segments it serves, never losing sight of the communities we serve.

Today, Warba Insurance is one of the largest insurance providers and insurance underwriters in the State of Kuwait, offering a comprehensive range of products under both life and non-life lines of business. The Company continues to deliver services with a personalized attention to clients’ needs, ensuring they get the security they need every day.

As we look forward to the future, our promise to our clients is that we will always remember where we came from, and maintain our standards and integrity in all our decisions and offerings. We believe that any success is based on strong and mutually beneficial relationships that we build along the way. This is why our focus remains on being a leader in the insurance industry and to deliver the best value, service and innovative solutions to each customer throughout our journey.

Life Insurance for group and individuals

Warba Insurance offers a wide range of solutions in Life Insurance to meet the needs of individuals and support their personal financial planning, as well as provide corporates and groups with personalized plans that serve their everyday business and risks.

Medical Insurance

The medical insurance policies cater to both individuals and corporates, and comprise levels of coverage.

Marine Insurance

Our vast knowledge and experience has enabled us to develop an array of marine insurance services that fit whatever type of vessel individuals and companies want to ensure.

Motor Insurance

Warba Insurance has and remains the trusted partner when it comes to motor insurance as we continue to provide excellent customer service and quality coverage. Motor insurance covers individuals and corporates of various sizes.

Fire and General Accidents (FGA) Insurance

Warba Insurance offers a range of policies in FGA insurance to companies and institutions as well as individuals. The Company provides full coverage policies for companies and institutions operating in real estate and industrial sectors, amongst others. For individuals, Warba Insurance offers a wide range of solutions that cover property, households, personal accidents, travel and more.

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Our Strength, Our Divisions

The support to our business lines

The success and quality of our business lines are supported by various departments that contribute to our customer service excellence.

Information Technology

At Warba Insurance, we follow dynamic methodology in the management of our operations. We apply the best global practices and standards in IT integrated solutions to measure and determine our performance indicators, and to develop a strong security infrastructure for information.

Human Resources

We believe in the importance of developing our human resources. This is our priority. Every member of our team, no matter in which division they work, is a significant asset to the Company. Our human resources department creates a rewarding work environment and training programs designed to ensure achieving the Company’s vision.

Legal Affairs

The Legal Affairs department is considered our main driver in our daily operations. It provides legal protection to our operations, and closely works as a consultant with other department before products and services are launched or signed.

Public Relations and Marketing

The Public Relations and Marketing vision ensures continued and transparent communication with our stakeholders, be it our individual customers, corporate partners, shareholders and more. We engage with our stakeholders through traditional media, digital and online channels, ensuring our customers can find what they’re looking for every time they search for Warba Insurance.

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Sales, Distribution and Underwriting Sector

The sales, distribution and underwriting sector is one of the most important sectors in the company and represents the company's operating activity and source of income. The sales, distribution and underwriting sector is based on a strategy aimed at enhancing the sales volume and close communication between the company and its clients, enabling the company to provide a better and comprehensive service to customers and all their needs. This sector focuses on completing the services provided to the customer with other services that will respond to the customer's changing needs. This is done by examining each case separately and closely to provide the services in an efficient and patient manner. The distribution channels aim to raise WARBA Insurance's position to a leading market leader while ensuring that its customer-centric approach remains in every aspect of its business.

Financial Affairs

The Finance Department manages the financial transactions of the company in accordance with international standards and specifications. It also manages investment portfolios, which represent a source of income for the company and contribute to enhancing the profitability of the company. Finance Department strength supporting the company finanial position

Claims and Network Management Sector

The Claims and Network Management sector ensures customers are served at best when it comes to providing them with advice on claims for compensation, restitution, repayment or any other remedy for loss or damage, or in respect of some other obligation, in addition to ensuring a sound management of protocols and efficient platform that provides quality assurance and enhances relations with all medical and service providers.

Administration Department

The Admin Department works to ensure the smooth running of the administrative work of the company, to ensure the ease of business with the official authorities, as well as to establish procedures aimed at controlling the maintenance and internal services in the company, and streamlining administrative expenses.

Governance, Risk Management and Compliance Sector

Risk Management Department

The department monitors the risks facing the Company, develops a unified vision as well as strategic plans to address them, monitors and evaluates the efficiency and quality of the Company's technical, and operational processes, manages its credit rating, prepares the Company's business plans in line with its risk appetite, prepares market and field research and studies, and ensure the strategic objectives for the work plans.


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C.Governance and Compliance Department

The department ensures that the Company is committed to working within a legal framework that complies with the laws and regulations issued by the regulatory authorities regarding the rules of governance, corporate law, anti-money laundering, terrorism funding, the US tax compliance law FATCA, and the Common Reporting Standards (CRS), in addition to following up with the implementation of ISO 9001.

Information Security Department

The Company's security, defense and information security programs are managed, information security policies are developed for the Company, reports are provided on the security status of information and databases, and any violations of company databases are monitored and reported as per ISO 27001 standards.

Internal Audit Department

The Internal Audit function examines, monitors and analyzes activities related to the context of financial and accounting operations within the Company, their conformity with international accounting standards and local laws and regulations in the country, and prepares periodic reports on Internal audits.

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Report for the Year Ended December 31. 2018

Corporate Governance

Acknowledging the significance of a sound corporate governance in the management of organizations and financial institutions in the private sector, particularly those that are publicly traded, the Capital Markets Authority (CMA) has issued regulations since 2013 mandating the development of a corporate governance framework by companies who abide by the Authority’s regulations in an aim to uphold the principal values of governance such as transparency, ethical conduct, control, accountability, and a sound organizational management to ultimately attract qualified professionals, safeguard shareholders and stakeholders’ rights, and commit to corporate social responsibility as pillars to the advancement of the economy.

CMA is the link between the government and the private sector. It coordinates their efforts within the comprehensive economic reform plan that aims to diversify sources of income in Kuwait as part of the Kuwait Vision 2035. Companies which abide by the regulations set by CMA have a role in the targeted diversification of the economy and its development.

CMA believes that a sound culture of corporate governance is the basis for achieving the economic development goals of Kuwait through the active role of the private sector, supporting the development of a strong national economy in which the efforts of its members are united to lift the it to international economic rankings.

Warba Insurance Company was one of the first companies to comply with the instructions and rules of governance issued by CMA as a continuation of the Company strategy and approach to management which was adopted by its Board of Directors since its inception. Its framework ensures its stability, sustainability and the preservation of its assets and capabilities against risks.

Shareholders’ Information as of December 31, 2018

Shareholder Number of Shares Percentage

The Arab Investment Company 51,230,885 29.649%

Al Imad Real Estate Company 50,000,000 28.937%

Warba Insurance Company (Treasure Shares) 10,698,171 6.191%

Al-Fraih Financial Services Holding Group 8,600,000 4.977%

Abdulrasool Hussein Mohammed Al-Ali 3,126,000 1.809%

Ibrahim Abdulrahman Al-Asfoor 3,009,054 1.741%

Al Barakah Kuwait General Trading & Contracting Company 2,725,725 1.577%

Mohammed Abdullah Ali Baksh 2,089,357 1.209%

Ahmad Abdullah Ali Baksh 2,029,720 1.175%

Fawzi Mohammed Faris Al Waqyan 2,000,000 1.157%

Others 37,279,828 21.575%

TOTAL 172,788,740 100%

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Credit rating

Credit Agency Rating Rating by S&P Outlook

Standard and Poor’s BBB BBB Negative

Moody’s Baa1 BBB+ Stable

The Board of Directors

The Board of Warba Insurance Company comprises Directors whom hold a long and exhaustive experience in economics, insurance and finance, locally, regionally and internationally, bringing their experiences and skills together to for the benefit of the Company, avoiding conflicts of interest and protecting the rights and interest of shareholders and stakeholders.

The Board of Directors has adopted strategic objectives and action plans that would benefit the Company first and foremost. In turn, the approach benefits shareholders and stakeholders, and enhances the Company’s long-standing strong position in the Kuwaiti economy.

The Board comprises seven non-executive Directors, while one is an independent Director. The Board of Directors of Warba Insurance is appointed by shareholders through an election held at the Ordinary General Assembly, and the tenure of each Director is limited to three years as per the Memorandum of Association, Articles of Association and in compliance with regulations issued by the Capital Markets Authority (CMA).

The Directors:

Mr. Anwar Jawad Bukhamseen Chairman

Non

-Exe

cutiv

e

Sheikh/ Mohammed Al-Jarrah Al-Sabah Vice Chairman / Independent Director

Mr. Raed Jawad Bukhamseen Board Director

Mr. Hazim Ali Al-Mutairi Board Director

Ms. Najat Hamad Al-Suweidi Board Director

Mr. Rafid Al-Rifai Board Director

Mr. Saleh Nasser Al-Saleh Board Director


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Qualifications of the members of the Board:

Mr. Anwar Jawad Bukhamseen, Chairman:

Mr. Anwar Bukhamseen has extensive experience in banking, insurance and real estate investment. He has held many leadership positions during his career while he currently holds a number of senior positions including: Board Director at Kuwait International Bank, Board Director at Qatar First Bank, Consultant to the Board of Ritaj Takaful Insurance Company, Executive Member in the Board of Directors of Bukhamseen Holding Company, Board Director at Kuwait Catalysts Company and Member of Kuwait Industries Union. He completed his Bachelor’s degree in Economics and Financial management from the Faculty of Commerce, Economics and Political Science at Kuwait University in 1995. He received a specialized degree in an executive program on foreign trade policies from Harvard University in 2005 and a specialized certificate from the Kuwait Foundation for the Advancement of Sciences (KFAS) on corporate governance and financial institutions.

Sheikh/ Mohammed Al-Jarrah Al-Sabah, Vice Chairman – Independent Director:

Sheikh / Mohammed Al-Jarrah Al-Sabah has extensive experience in banking, insurance and real estate investment. He is the Chairman of Kuwait International Bank, Chairman of the Union of Arab Banks, Board Director of the Kuwait Banking Association, member of the Board of Trustees of the Arab Academy for Banking Sciences. He holds years of experience having held senior managerial positions in a number of leading firms in Kuwait, including the Kuwait Real Estate Investment Consortium, the Commercial Bank of Kuwait, the Kuwait Reinsurance Company, Salhia Real Estate Company and the Arab Insurance Group (Arig).

Mr. Raed Jawad Bukhamseen, Board Director:

Mr. Raed Bukhamseen has years of experience in investment, banking and business management. He is the Vice Chairman of the Kuwait International Bank, in addition to holding the position of chairman and being a member in other boards in leading companies including: Boukhamseen Holding Company, Arab Investment Company, Knet Banking Company, Egyptian Gulf Bank in Egypt, Layan Real Estate in Dubai, Souk Al-Salmiah Real Estate Company and Credit One Kuwait Holding Company. He holds a Bachelor’s degree in Business Administration obtained in 1999 from Boston University in the United States of America, and holds specialized degrees in portfolio management, credit, and investment analysis.

Mr. Hazim Ali Al-Mutairi, Board Director:

Mr. Hazim Al-Mutairi has more than 25 years of experience in various sectors including finance, investment and treasury. He currently serves as a Board Director at Boubyan Bank as well as being CEO of Credit One Kuwait Holding Company. He graduated from the United States and holds a Bachelor’s degree in Finance.

Ms. Najat Hamad Al-Suweidi, Board Director:

Ms. Najat Al-Suweidi has extensive experience in the fields of investment, banking and management. She is currently a Board Director at the Kuwait International Bank, in addition to being a member of the board in many investment companies and has represented Kuwait on behalf of the Kuwait Investment Authority in several government forums including the World Economic Forum in Davos and government debt meeting in Paris for over 20 years. She is currently a Board Director of Iskan Global Real Estate Development Company and held previously held a number of senior positions in the Kuwait Investment Authority, member of the Advisory Committee for the Artisanal and Small Business Finance Portfolio at the Industrial Bank of Kuwait, Chairman and Managing Director of the Arab Investment Company and Chairperson of the Kuwait Company for the Development of Small Enterprises. She holds a Bachelor’s degree in Economics from Kuwait University, obtained in 1974 and holds a degree in Financial Markets from the University of Manchester, UK.

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Mr. Rafid Al-Rifai, Board Director:

Mr. Rafid Al-Rifai has over 25 years of experience in the fields of finance, investment, supply of catalysts and chemicals to the oil and gas industry and catalyst manufacturing. He held several positions including Assistant General Manager and Managing Director of Abdullah Sayed Rajab Al-Rifai (Al-Rifai Group). He is currently the Executive Director of Abdullah Sayed Rajab Al-Rifai & Sons Trading & Contracting Company and Board Member of Kuwait Catalyst Company. He holds a Bachelor’s Degree in Business Administration.

Mr. Saleh Nasser Al-Saleh, Board Director:

Mr. Saleh Al-Saleh has extensive experience in the fields of investment and national industries. He currently heads the Board of Directors of the National Agricultural Products Company and is a Board Director at Al Mawashi. He has also served on the Board of several major companies.

2018 Board Meetings:

Meeting Reference Number Meeting Date Number of Attendees

(1/2018) 27/02/2018 5

(2/2018) 29/03/2018 7

(3/2018) 02/04/2018 6

(4/2018) 30/04/2018 5

(5/2018) 14/05/2018 6

(6/2018) 12/08/2018 7 (by circulation)

(7/2018) 05/11/2018 7

Responsibilities of the Board of Directors:

Adopt business strategies, objectives and policies, including:

• A company strategy and action plans, review it and guide it.

• An ideal capital structure for the Company and its financial objectives.

• A set policy to distribute cash and non-cash dividend to benefit shareholders and the Company.

• Set performance indicators and evaluate the execution and overall performance of the Company.

• Form the organizational structure of the Company and evaluate, develop, and identify the tasks and responsibilities.

• Adopt annual estimated budgets and interim and annual financial statements.

• Oversee major capital expenditures for the Company and the ownership and disposal of assets.

• Ensure the Company complies with policies, procedures and internal control systems relating to the Company.

• Verify the accuracy and credibility of the financial statements of the Company and of its business results to safeguard the rights of the shareholders.

• Identify communication channels to allow shareholders to review the Company’s activities and


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milestones periodically.

• Implement a corporate governance system for the Company – which does not conflict with these rules – and perform general supervision and monitoring over the degree of its effectiveness and amend it when needed.

• Supervise the performance of each Director and the Executive Management based on set key performance indicators (KPIs).

• Prepare the annual report and financial statements of the Company annually, and include the Company’s compliance with corporate governance regulations. The report should show regulations complied with, and those that were not complied with, as well as show reasons for not complying.

• Form committees; establish their work programs; determine their powers, duties, and responsibilities and delegate decision-making powers, defining the authority level to sign on behalf of the Company, as well as evaluate the performance of each committee and their main members.

• Ensure that policies and the structure of the Company is transparent and clear, which would allow for a process of decision making and achieving the principles of sound corporate governance and the segregation of powers and authorities between the Board of Directors and the Executive Management. The Board should be responsible of the following:

• Supervise the development, implementation, and evaluation of work programs and procedures and verify their adequacy and appropriateness in view of the size and complexity of the operation.

• Adopt a delegation of authority policy for the tasks entrusted to the Executive Management.

• Define the authorities that have been delegated to the Executive Management and the procedures of decision making and the duration of such delegation. The Board also defines the areas that it retains the authority to decide upon. The Executive Management is required to report on the authorities delegated to it on a periodical basis.

• Monitor and supervise the performance of Executive Management and ensure that they perform the roles entrusted to them, ensuring that the Executive Management is operating as follows:

• Ensure that the Executive Management is operating according to the policies and regulations approved by the Board of Directors.

• Hold periodical meetings with Executive Management to discuss the course of action and any challenges or issues, review and discuss important information related to the Company’s activity.

• Set performance standards for the Executive Management in line with the Company’s objectives and strategy.

• Identify the remunerations that will be provided to the employees, such as fixed remunerations, performance and long-term risk-based remunerations as well as stock bonus remuneration.

• Appoint or dismiss any member of the Executive Management, including the Chief Executive Officer or anyone under him.

• Implement a policy organizing the relationship with stakeholders in order to protect their rights.

• Implement a mechanism to organize dealing with related parties, in order to limit and address any conflict of interest.

• Ensure, on a periodical basis, the effectiveness and adequacy of internal control systems applicable in the Company and the subsidiaries, as follows:

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• Verify the accuracy and credibility of the financial statements of the Company and of its business results to safeguard the rights of the shareholders.

• Ensure that proper internal control systems are being implemented to evaluate and mitigate risks. This is done by identify risks, setting an environment that limits risks at the Company level, and communicating transparently with stakeholders and parties related to the Company.

Responsibilities of the Executive Management:

• Executing the various policies, regulations and the internal control procedures of the Company approved by the Board of Directors.

• Executing strategies and annual plans approved by the Board of Directors.

• Preparing periodical reports (financial and non-financial) regarding the progress of the Company’s activity in light of the strategic plans and goals of the Company and presenting these reports to the Board of Directors.

• Implementing a complete accounting system that maintains ledgers, registers and accounts that presents accurately and in details the financial data and profit and loss accounts, which allows maintaining the Company’s assets and preparing financial statements according to the international accounting standards approved by the Capital Markets Authority.

• Managing day to day activities of the business, as well as managing the Company’s resources optimally and working on increasing profits and reducing expenditures in accordance to the objectives and strategies of the Company.

• Contribute effectively in the establishment and development of ethical standards in the Company.

Board Committees

The Board Committees are considered direct links between the Board of Directors and the Executive Management of the Company. These Committees support the Board in supervising the operations of the Company and to give recommendations to be reviewed by the Board. The Board has laid down the detailed framework of these committees, identifying their roles and responsibilities, composition and meetings.

The Committees were formed based on the requirements outlined by the CMA. The Committees cover the managerial and technical operations of the Company to give the Board a full reporting on developments and enable the Board to take studied decisions, implement strategies and action plans that achieve the objectives of the Company.

The Board also forms temporary Committees that serve specific responsibilities periodically. These Committees are closed ones the responsibility is completed.

Committee Composition Approval

Executive and Investment Committee √ √

Audit Committee √ √

Risks and Compliance Committee √ √

Nominations and Remunerations Committee √ √

Corporate Governance Committee √ √


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Corporate Governance Organizational Structure:

Executive and Investment Committee

Composition

Member Position Number of Meetings


3 MeetingsSheikh Mohammed Al-Jarrah Al-Sabah Vice Chairman

Mr. Raed Jawad Bukhamseen Member

Mr. Hazim Ali Al-Mutairi Member

Responsibilities

• Ensure that the Company’s policies and procedures are updated and implemented properly in alignment with the Company’s goals and objectives.

• Develop and recommend strategic plans in line with the Company’s long-term objectives and priorities.

• Adopt, monitor and assess investment policies, as well as evaluate investment transactions.

• Supervise the Company’s compliance with its estimated budget, compare the real performance indicator with the targeted performance indicator, and resolve discrepancies if any.

• Develop action plans in line with the objective of the Board of Directors, and recommend systems to implement them.

• Monitor organizational structure and internal regulations.

• Review investment opportunities.

• Evaluate current investments and the Company’s investment portfolio.

Shareholders’ General Assembly

BOD

Nominations&Remunerations

Committee

Audit Committee

Chairman

Executive & Investment Committee

G.R.C. Sector

Risk &ComplianceCommittee

CorporateGovernance Committee

Internal Audit Unit

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Corporate Governance CommitteeComposition



1 MeetingSheikh Mohammed Al-Jarrah Al-Sabah Vice Chairman

Ms. Najat Hamad Al-Suweidi Member

Responsibilities

• Conduct quarterly reviews to ensure compliance with corporate governance guidelines, laws, rules, and regulations of various statutory authorities and regulatory bodies.

• Prepare reports and recommendations on the Company’s compliance with corporate governance, laws, and regulations.

• Ensure the Company implements decisions, laws and regulations issued by regulatory bodies, and place recommendations to develop and implement the new standards and practices.

• Supervise and monitor the implementation of principles and frameworks of corporate governance adopted by the Board.

• Review and amend the corporate governance manual in line with regulatory requirements.

• Review internal reports on sound governance principles adopted by the Company.

Risks and Compliance Committee


Ms. Najat Hamad Al-Suweidi Chairman


Mr. Raed Jawad Bukhamseen Member

Responsibilities

• Supervise the implementation of a single vision to mitigate risks at the corporate level, in order to ensure a consistent and efficient management of any risk facing the Company.

• Prepare and review the strategies and policies of risk management before it is approved by the Board of Directors, and ensure that the same is consistent with the complexity, nature and size of the Company’s activity. Ensure independency of the Board from the Executive Management.

• Ensure the development and implementation of strategic plans and policies that serve the long-term objective and priorities of the Company.

• Assist the Board of Directors in identifying and assessing the acceptable level of the risks, to ensure that the Company does not breach this level of the risk after approval from the Board of Directors.

• Monitor the efficiency and quality of investment operations and returns from these operations in adequacy with the plans and objectives of the Company.

• Evaluate and review risks assessment reports of the Company and the procedures undertaken to limit or mitigate risks at acceptable rates.

• Review and pre-approve risks management manuals and procedures.


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Audit Committee

Composition


Mr. Hazim Ali Al-Mutairi Chairman


Mr. Rafid Al-Rifai Member

Responsibilities

• Review periodical financial statements prior to their submission to the Board of Directors and provide such Board with opinion and recommendation concerning them, in order to ensure fairness and transparency of financial statements.

• Provide the Board of Directors with its recommendations concerning the appointment, re-appointment, or replacement of the external Auditors, and specify the remunerations thereof. Upon recommendation of appointment, it is considered to verify independence of such external auditors and review letters of their appointment.

• Follow up works of external Auditors and ensure no services other than services related to audit functions are provided to the company.

• Consider remarks of external auditors on the company financial statements and follow up measures taken regarding them.

• Consider the applied accounting policies and provide the Board of Directors with opinion and recommendation in this regard.

• Evaluate the extent of sufficiency of internal audit systems in place, and prepare a report including the opinion and recommendations of the committee in this regard.

• Supervise the company’s internal audit department, in order to ensure its effectiveness in performing the operations and tasks assigned by the board of directors.

• Recommend appointment of an internal audit manager, his transfer, and removal, in addition to evaluating his performance, and the performance of the internal audit department.

• Review and approve audit plans proposed by the internal auditor and provide feedback.

• Review the results of the internal audit reports and ensure that the necessary corrective actions were taken concerning the observations stated in such reports.

• Review the outcomes of regulatory bodies’ reports and ensure that necessary measures were taken in this regard.

• Verify the company compliance with related rules, policies and regulations.

Nominations and Remunerations Committee

Composition


Mr. Raed Jawad Bukhamseen Chairman


Mr. Hazim Ali Al-Mutairi Member

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Responsibilities

• Ensure that the most qualified, experienced and skilled staff are nominated to vacancies in accordance with the standards of competencies and integrity.

• Recommend the recruitment of qualified professionals at the level of senior management on the basis of policies and standards adopted at the Company.

• Nominate candidates to be elected at the Annual General Meeting of Shareholders for the role of Director or member of a committee based on the regulations of transparency and efficiency, including independent members.

• Determine the Company’s needs for qualified staff at the level of executive management.

• Formulate and review annually the policy on job scales, granting remuneration, benefits, incentives and salaries to employees of the Company.

• Implement policies and procedures for remunerations and rewards.

• Prepare the policy for remunerations allocated to the Board of Directors and their committees.

• Prepare an annual report on rewards granted to the Board of Directors and the Executive Management, and present it for approval to the Annual General Meeting of Shareholders.

The Governance, Risk Management and Compliance (G.R.C) Sector:

In recognition of the importance of internal control and its vital role in financial institutions, the Board of Directors has approved the formation of the Corporate Governance, Risk and Compliance Sector as a first in the State of Kuwait and the GCC since 2013. The Sector has a set of laws and regulations, which governs it which are in accordance with the best international practices in this field. The Sector has been for six consecutive years a point of trust in maintaining the internal control functions of the Company.

Internal control systems are one of the most important, if not the most important one, in a company. The internal control unit supervises the Company’s operations to avoid and mitigate current and future institutional risks, whether administrative, technical or financial. It also develops the Company’s business in accordance with the best international practices through long-term strategic plans (administrative, technical and financial), policies and procedures needed by the Company, and oversees the application of various policies and procedures to best use the resources available at the Company, while applying the mandatory requirements by regulatory bodies.

As part of its belief in the importance of internal control and its significance in institutions, the Board of Directors has entrusted this vital task to the sector of Governance, Risk Management and Compliance which has constantly upheld the trust of the Board in the role entrusted to it.


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The Organizational Structure of the G.R.C Department and its Responsibilities:

Board of Directors

Chief Executive Officer

Chairman

Personal Assistant

Manager – C.Governance& Compliance Dept.

Manager – Information Security Dept.

Risk Management Department

Manager – Risk Management Dept.

C. Governance& Compliance Dept. Information Security Department

AML, CTF, FATCA& Investor Relations Officer

Chief Governance, Risk& Compliance (G.R.C) Officer

Governance, Risk& Compliance (G.R.C.) Sector

C. Governance& Compliance Officer

Networks Security Officer

Applications Security Officer

Operational Risk Officer

Enterprise Risk Management (ERM) Officer

Legal& RegulatoryRisk Officer

Financial, Credit& Market Risk Officer

Board Executive& Investment Committee

Board Corporate Governance Committee

Board Risk& Compliance Committee

Responsibilities of the G.R.C Department:

Risk Management Department:

• Implement the vision to mitigate risks at the corporate level, in order to ensure a consistent and efficient management of any risk facing the Company.

• Provide strategic guidance and adopt strategic risk initiatives.

• Develop strategic plans in adequacy with the long-term objectives and priorities of the Company.

• Supervise the implementation of strategies and policies approved by the Board of Directors.

• Monitor financial and operational results and compare them with plans and objectives set as well as the estimated budget.

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• Monitor the efficiency and quality of investment operations and returns from these operations in adequacy with the plans and objectives of the Company.

• Submit periodic reports on the exposure to risk and procedures to avoided and mitigate risks.

• Set and measure the adequacy and efficiency of evaluation methodologies and risk assessment in the Company.

• Ensure the adequacy of liquidity and funding and the strength of the financial solvency of the Company.

• Evaluate and follow-up on the Company’s investment and market risks.

• Evaluate and follow-up on technical risks within the Company.

• Evaluate and follow-up on operational risks facing the Company.

• Provide and deliver information to credit rating agencies.

• Provide the required technical advice and assistance to relevant departments in preparing their plans.

• Prepare the strategic objectives of the action plans.

• Prepare future financial studies.

• Prepare due diligence reports.

• Evaluate foreign markets and their suitability for investment. As per the company's risk appetite

Corporate Governance and Compliance Department:

• Ensure the Company’s commitment to work through the legal framework in conformity with the principles of corporate governance in accordance to the policies and procedures necessary for the development.

• Organize Board and committees’ work.

• Organize the Annual General Meeting of Shareholders agenda.

• Ensure the Company complies with legal and regulatory obligations as required by regulatory authorities.

• Review activities concerning anti-money laundering and terrorism financing, and place policies and regulations to manage these activities.

• Follow-up on regulations relating to the Foreign Account Tax Compliance Act (FATCA) and develop of policies and procedures to its implementation.

• Follow-up on the Common Reposting Standard (CRS) and develop of policies and procedures to its implementation.

• Develop and update policies and procedures of various departments in the Company.

• Prepare progress reports and apply internal policies and procedures.

• Supervise the implementation of ISO 9001:2015 quality standards in all operations.

Investor Relations Unit:

• Make information and reports needed available to current and potential investors.

• Enhance open dialogue channels and encourage the exchange of information to enable investors and financial analysts to gain insights into the Company’s strengths and future prospects.

• Provide a vision based on the highest standards of transparency and reliability and provide access to the latest information.


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• Provide comprehensive disclosures on financial performance mandated by Boursa Kuwait, including quarterly reports, disclosures, profit statements and presentations to the business and investment community.

Information Security Department:

• Manage information security programs in information centers and website.

• Develop IT security policies in accordance with international standards.

• Develop specifications and standards for technologies and programs used in order to protect information sent by departments and units of the Company.

• Develop policies to manage issues relating to information security in order to resolve the issue in the shortest time when they occur.

• Spread awareness and a culture of information security to employees.

• Conduct quality control assessments to ensure the network and systems are protected.

• Stay up-to-date with the latest development to identify technologies and programs required to improve the working environment and security.

• Review and evaluate the security policy, as well as develop it.

• Ensure protection tools are installed on hardware and software in all information centers.

• Ensure all computers are equipped with effective protection programs.

• Monitor the efficiency and effectiveness of security systems used.

• Ensure implementation of the ISO 27001:2013 quality standards for IT.

Quality Management System:

Quality Management (ISO 9001):

Warba Insurance maintained the highest administrative quality in all of its business and committed to the international standards for quality management systems “ISO 9001” and is keen on high performance and quality levels in accordance with those standards to provide high quality services to its customers.

Warba Insurance earned the quality management systems certification ISO 9001:2008 over the past nine years, ultimately earning the ISO 9001:2015 based on the most recent international standards. The Company received the certification thanks to the support provided by the Board of Directors, its committees and Executive Management, whom ensure business quality management system continuity within the Company, which is reflected on the services provided to its customers, and maintaining Warba’s pioneering position and leadership in the Kuwaiti insurance market, in which it is the first insurance Company to have received such an international recognition, and one of the first companies in Kuwait to join the Standardization Organization for the Gulf Cooperation Council.

Information Security Quality (ISO 27001):

Staying abreast of operations performed online, Warba Insurance has protected its business rules and databases from aggressive cyberattacks from around the world by renewing its commitment to protecting customers’ interest and upholding the quality of services provided to our partners in success.

In order to maintain its leadership and excellence, the Company has obtained the ISO 27001:2013 certification, adding to its series of success in managing its internal organization and confirming the security and trust in every aspect of its business.

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The Organizational Structure:


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Board Report on the Internal Control System:

The Board of Directors of Warba Insurance is liable of evaluating the efficiency of the Company’s internal control systems to ensure efficiency of operations, quality of internal and external reporting, as well as to comply with laws and regulations. The upper management is responsible for implementing the internal control systems, and to maintain it in order to manage risks that could hinder the Company’s objectives. The internal control system provides balanced guarantees to avoid risks that could generate serious losses to the Company.

The Board of Directors has adopted an organizational structure in line with the Company structure and systems. It has also adopted job descriptions outlined roles and responsibilities, policies and regulations for tasks and operating procedures. These policies and regulations identifies the duties and responsibilities, the authorities and the reporting system for each department, so as to achieve a dual control and tasks divisions that avoid duplicating roles.

The Board of Directors consistently reviews policies and the internal control system in cooperation with the higher management and internal control employees (which include the internal auditing unit, and the governance, risks and compliance departments). The review allows room for improvements, and evaluates risks and challenges. The Board of Directors also ensures that internal control jobs are well positioned in the Company, are well staffed and have sufficient resources to fulfill their responsibilities independently and efficiently.

The upper management has also taken the necessary step to implement the new regulations of corporate governance issued by CMA. These regulations include an update on authorities outlined in the corporate governance list, preparing new documents and procedures necessary to implement these regulations.

The efficiency of the internal control systems is periodically reviewed by the Board of Directors and it committees. The Board and committees review reports prepared by the Governance, Risk Management and Compliance Sector and the Internal Auditing Unit in the Company.

The higher management reviewed the internal control systems on December 31, 2018, confirming that is coherent and provides balanced guarantees in order to achieve the Company’s goals.

The Company has also recruited an external audit consultant (in accordance with Article 6-9 of the Corporate Governance Guidelines) to review the adequacy of the Company's internal control systems and prepare the ICR report, which is presented to the CMA on an annual basis.

Report of the Audit Committee for the year ended December 31, 2018:

The Audit Committee met in four meetings during 2018 and carried out all its functions in accordance with the Charter of the Committee and the Organization's instructions, covering all the activities of the Company and its organizational structure in accordance with the approved audit plan. The Board of Directors adopted all the recommendations of the Committee and there were no contradictions noted.

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Report for the Year Ended December 31, 2018

Consolidated Financial Statement

WARBA INSURANCE COMPANY K.S.C.P. AND ITS SUBSIDIARY

CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2018

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